BAUHAUS USA, INC., Plаintiff-Appellant, v. Lillie Regina Holmes COPELAND, etc.; et al., Defendants, Lillie Regina Holmes Copeland, as natural guardian and next friend of Reshan Holmes; and Reshan Holmes, a minor, Defendants-Appellees.
No. 01-60343.
United States Court of Appeals, Fifth Circuit.
May 21, 2002.
Rehearing and Rehearing En Banc Denied June 21, 2002.*
Thomas H. Lawrence (argued), John Morris Russell, Lawrence & Russell, Memphis, TN, Glover Alcorn Russell, Jr., Watkins, Ludlam, Winter & Stennis, Jackson, MS, for Plaintiff-Appellant.
Roy O. Parker (argued), Roy O. Parker & Associates, Tupelo, MS, for Defendants-Appellees.
* Judge Wiener would grant the Petition of Rehearing.
W. EUGENE DAVIS, Circuit Judge:
Plaintiff Bauhaus USA, Inc. (“Bauhaus”), appeals from the district court’s dismissal of its declaratory judgment action to enforce the terms of an employee benefit plan against defendants Lillie Regina Holmes Copeland and her daughter Reshan Holmes. Bauhaus sought a declaratory judgment in the district court that it was entitled, under the terms of the plan, to funds resulting from a settlement between defendants and third-party tortfeasors. The defendants moved to dismiss the case, arguing that the Employee Retirement Income Security Act of 1974 (“ERISA”)1 does not preempt Mississippi’s anti-assignment rule. The district court granted the defendants’ motion. Because we conclude that ERISA does not authorize Bauhaus’ declaratory judgment action, we do not reach the preemption question.
I.
On June 1, 1996, James Davis crashed the vehicle he was driving into a car carrying seven year-old defendant Reshan Holmes, who suffered injuries. Hоlmes is the daughter of defendant Lillie Regina Holmes Copeland. Copeland was an employee of Bauhaus, the sponsor and administrator of an employee benefit plan (the “Plan”) that covered Copeland as a participant and Holmes as a beneficiary. Although the Plan did not cover injuries resulting from the acts of another, the Plan honored Copeland’s request for benefits and elected to advance payments for Holmes’ medical expenses in the amount of $46,229.45.
According to the Plan’s provisions, one condition of any advance payment of benefits is that the Covered Person reimburse the Plan out of any recovery against a third party. In relevant part, the Plan provides:
Medical care benefits are not payable to or for a person covered under this Plan when the injury or illness to the Covered Person occurs through the act, omission or alleged negligence of another person....
However, the Plan may elect to advance payment for Medical Care expenses incurred for an injury or illness in which a third party may be liable if the Covered Person agrees to the following:
The Covered Person will reimburse the Plan out of the Covered Person’s recovery fоr all benefits paid by the Plan. The Plan will be reimbursed prior to the Covered Person receiving any monies recovered from a Third Party or their insurer as a result of judgment, settlement or otherwise....
....
The Covered Person further agrees that he will not release any third party or their insured without prior written approval from the Plan, and will take no action which prejudices the Plan’s subrogation right.
The Plan defines “Covered Person” to include both employees and their minor children. The Plan is self-funded—that is, it does not purchase an insurance policy but is funded only by the sponsoring employer—here Bauhaus. The parties agree that the Plan is an employee welfare benefit plan governed by ERISA.
For legal standing to represent Holmes in litigation, Copeland sought and was granted appointment as Holmes’ legal guardian. In the context of that guardianship case, Copeland pеtitioned the Mississippi Chancery Court for authority to settle Holmes’ claim against the Tortfeasors according to the proposed settlement agreement. The settlement agreement required the Tortfeasors to pay into the Registry of the Lee County Chancery Court $78,161.47 of the settlement proceeds, an amount sufficient to cover all liens against the proceeds. The agreement further stated that all parties with claims against that money would then be “served with process in the interpleader action.”
A separate interpleader action never developed. Rather, the Chancery Court ordered that the Plan be made a party to the guardianship case and required to show why the Tortfeasors should not be given a release. The Plan then gave notice of removal of the guardianship case to the Northern District of Mississippi. Holmes moved to remand, and the Plan consented; accordingly, the district court remanded the case to the state court in June 2000.
A week later, Bauhaus, as administrator of the Plan, sued Copeland, Holmes, and the Tortfeasors in the Northern District of Mississippi, seeking a declaratory judgment that “Bauhaus is entitled to and shall receive full reimbursement of $46,229.45 from the proсeeds of the settlement ... upon approval by the Chancery Court of the settlement.” The crux of Bauhaus’ case was, and is, that ERISA preempts the Mississippi law that requires court approval of the assignment of a minor’s right to insurance proceeds.
A week after Bauhaus filed suit in federal court, the Chancery Court approved Copeland’s petition to settle Holmes’ claims. The sum of $78,161.47 remains in the registry of that court, and the guardianship case is still pending.2 The tort litigation, however, is closed. The Chancery Court’s order (1) released the Tortfeasors from all “claims, demands, liens [and] subrogation interests” arising out of the tort litigation, including Bauhaus’ claim; and (2) required dismissal of the tort litigation.
The Tortfeasors, Copeland, and Holmes moved the district court to dismiss the action. The Tortfeasors argued that the doctrines of res judicata and release barred Bauhaus from suing them again. Copeland and Holmes contended that dismissal was proper on three grounds: (1) absence of a federal question, because ERISA does not preempt Mississippi’s anti-assignment rule; (2) lack of federal jurisdiction over the funds in question, because they are in the registry of the Mississippi court; and (3) consent to state jurisdiction, because Bauhaus had agreed to remand the guardianship case to state court.
In March 2001, the district court granted the motions to dismiss because it found that ERISA did not preempt Mississippi’s anti-assignment rule, and therefore, that it
II.
We review de novo a district court’s grant of a motion to dismiss.3 We must therefore take the complainant’s allegations as true, and may not dismiss a claim unless it appears certain that the plaintiff cannot prove any set of facts in support of its claim that would entitle it to relief.4
The parties urge this court to decide whether ERISA preempts Mississippi’s anti-assignment rule that requires court approval of any assignment of a minor’s interest in insurance proceeds.5 Before we may reach the merits of the parties’ preemption arguments, however, we must make certain that jurisdiction is proper in this case.6 “Every federal appellate court has a special obligation to satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review, even though the parties are prepared to concede it.”7
ERISA grants the federal courts “exclusive jurisdiction of civil actions under this title brought by ... [a] fiduciary.”8 The parties agree that the Plan is governed by ERISA and that Bauhaus, as administrator of the Plan, is a “fiduciary” under ERISA. The only question that this court must resolve to determine whether jurisdiction is proper, therefore, is whether ERISA authorizes Bauhaus’ suit.
In Mertens v. Hewitt Associates, 508 U.S. 248, 113 S. Ct. 2063, 124 L. Ed. 2d 161 (1993), the Supreme Court made clear that the term “equitable relief” in
Janette and her then-husband filed a state tort suit against the Hyundai Motor Company (“Hyundai”), the manufacturer of the car in which they were riding when they were injured, and other tortfeasors.19 The parties negotiated a $650,000 settlement which allocated $256,745.30 to a Special Needs Trust to provide for Janette’s medical care; $373,426 to attorney’s fees and costs; and $13,828.70 to satisfy Great-West’s claim under the plan’s reimbursement provision.20 Before the state court approved the settlement, however, Great-West filed a notice of removal in the federal district court, asserting ERISA claims and that it was a defendant in the state law action.21 The district court denied Great-West’s notice and remanded the case to state court, where that court approved the settlement.22 Accordingly, the tortfeasors paid the settlement money to the Special Needs Trust and gave the remainder
The Supreme Court held that ERISA did not authorize Great-West’s suit, and therefore, affirmed the dismissal of the action.25 The Court found that Great-West was not seeking “to enjoin any act or practice which violate[d] ... the terms of the plan” or “to obtain other appropriate equitable relief” under
The Court refused to accept Great-West’s argument that the relief it sought met the Mertens standard.28 First, the Court rejected Great-West’s contention that Great-West sought an injunction or specific performance to compel the Knudsons to repay the contested funds. The Court reasoned that “an injunction to compel the payment of money past due under a contract, or specific performance of a past due monetary obligation, was not typically available in equity.”29
The Court also held that the relief that Great-West sought did not constitute restitution in equity.30 Distinguishing restitution in equity from restitution at law, the Court defined restitution in equity as a “form of constructive trust or equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession.”31 The Court reasoned that Great-West did not seek restitution in equity because the proceeds of the settlement to which Great-West maintained it was entitled were not in the Knudsons’ possession, but were in the Special Needs Trust.32 The Court explained that “[t]he basis for petitioners’ claim is not that respondents hold particular funds that, in good conscience, belong to petitioners, but that petitioners are contractually entitled to some funds for benefits that they conferred.”33
Finally, the Court rejected the contention that the common law of trusts encompassed the relief sought by Great-West.34 The Court found that the trust remedies were “simply inapposite” to the relief sought by Great-West.35
We conclude that the facts of the instant case are indistinguishable in principle from Great-West. Both cases involve ERISA-governed employee benefit plans that include reimbursement provisions allowing the plans to recover from any settlement proceeds any amount the plans advanced for medical expenses resulting from third party wrong-doing. Third-party tortfeasors injured the plan beneficiaries in both cases, and the plans advanced funds to the beneficiaries for medical expenses. In both cases, the plan beneficiaries made tort settlements with third-party tortfeasors following suit in state court. In both, the plan administrator or assignee filed suit in the federal district court seeking declaratory relief that it was entitled to repayment of the benefits it had conferred. In the instant case, the settlement proceeds are in the registry of the Mississippi Chancery Court. In Great-West, the proceeds of the settlement were placed in a private Special Needs Trust outside the possession and control of the plan beneficiary. Nevertheless, the defendants in this case, like the Knudsons in Great-West, are not in possession of the disputed funds, a fact that Justice Scalia found extremely important in Great-West.
The Court in Great-West characterized the suit in that case as “[a] claim for money due and owing under a contract” and that such a suit is “quintessentially an action at law.”36 Because the facts in today’s case are, in principle, indistinguishable from those in Great-West, we are bound by that decision and hold that
For reasons stated above, we affirm the district court’s dismissal of this suit for lack of federal jurisdiction because ERISA does not authorize this suit. Consequently, we do not reach the parties’ preemption arguments.
AFFIRMED.
WIENER, Circuit Judge, dissenting:
Federal preemption is the keystone that gives ERISA’s arch the ability to span the nation with a single, uniform, pension and welfare-benefit law. When Congress manifested its intent to create such an exclusive federal presence in that field of law, it expressly decreed perhaps the most comprehensive and pervasive preemption of the present era. In the absence of federal jurisdiction, however, federal statutory preemption fails. Therefore, unless the federal courts cautiously, deliberately, and charily examine every asserted challenge to, or claim of limitation on, subject-matter jurisdiction under ERISA, Congress’s command cannot be effectuated to the extent clearly intended.
Unfortunately, in adopting an overly expansive reading of Great-West Life11 to conclude that the district court lacked jurisdiction over Bauhaus’s suit, the panel majority errs. Although I have difficulty in discerning the majority’s precise reasoning, I am left no choice but to conclude that my learned colleagues have misunderstood the narrowness of the rule that the Supreme Court announced in that case. Because I am convinced that jurisdiction of this case lies in the federal courts even under Great-West Life, and believe that
I. SUBJECT-MATTER JURISDICTION
Great-West Life, asserts the majority, requires that we affirm the district court’s dismissal. That assertion is not at all supported by the realization (alluded to and perhaps relied on by the majority) that Bauhaus’s complaint seeks an extremely narrow remedy. And that assertion is utterly refuted by a deeper analysis and thorough understanding of the Supreme Court’s opinion in Great-West Life.
A. Declaratory Judgment
The fact that Bauhaus’s complaint specifically sought only declaratory relief2 does not mean, as the majority seems to imply, that the district court automatically lacks jurisdiction of this case.3 It is true that the district court could have had subject-matter jurisdiction only if Bauhaus raised a federal question.4 But when we construe Bauhaus’s prayer for relief with the liberality that the federal rules require of us, the federal question becomes undeniably apparent.
1. ERISA (29 U.S.C. § 1132)
ERISA gives the federal district courts “exclusive jurisdiction of civil actions under this subchapter brought by ... [a] fiduciary.”5 No one contests that Bauhaus, as the custodian and administrator of the Plan, is a “fiduciary” within the meaning of this section. The statute carefully delin-
(a) Persons empowered to bring a civil action. A civil action may be brought—
...
(3) by a ... fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan[.]6
Hence the first jurisdictional issue: Is a complaint that demands a purely declaratory judgment a “civil action ... to obtain other appropriate equitable relief” under
The leading case construing “appropriate equitable relief” is Mertens v. Hewitt Associates.7 In it, the Supreme Court interpreted
To answer this question in the affirmative may seem incongruous at first. Like most courts, we generally view the Declaratory Judgment Act10 as a procedural statute, not an independent basis of federal jurisdiction.11 More importantly, the Declaratory Judgment Act became law in the 1930s, just as the Federal Rules of
2. Rule 54(c)
Nevertheless, the remedies that a federal court may bring to bear are not constrained by a litigant’s prayer for relief; rather, the Federal Rules of Civil Procedure command the federal courts to grant relief that complainants do not demand when such relief is appropriate.12 As one leading treatise notes,
adherence to the particular legal theories of counsel that may have been suggested by the pleadings is subordinated to the court’s duty to grant the relief to which the prevailing party is entitled, whether it has been demanded or not.13
Thus “coercive relief or damages may be given in a suit seeking a declaratory judgment.”14 The Rules’ policy of mandating liberal construction of pleadings should place Bauhaus’s complaint in the Mertens box, because in general, “it is not the ... type of relief requested in the demand that determines whether the court has jurisdiction.”15 As I demonstrate below, Bauhaus is entitled to relief that would pass the Mertens test.
In short, the panel majority implicitly assumes that in our jurisdictional analysis, we must take Bauhaus’s prayer for relief at face value, even though the Rules mandate that in awarding relief, federal courts look beyond the prayer to the underlying claim. The facial assumption that the prayer controls the relief, which the majority makes no attempt to defend, is heavy freight with which to lade the language of
3. The Remedial Indeterminacy of Declaratory Judgment
Even if we were bound by Bauhaus’s prayer for relief (which may or may not be the panel majority’s view), the relationship between declaratory judgment and equity can be—and is here—far tighter than the majority suggests. For openers, declara-
B. Interpreting Great-West Life
The majority seems to rely chiefly, however, on Great-West Life rather than Mertens, stating that “the facts in today’s case are, in principle, indistinguishable from those in Great-West,” and apparently drawing from that case the rule that if the disputed funds are not in the possession of an ERISA beneficiary, the ERISA plan cannot sue in federal court. This simply is not the rule that Great-West Life laid down; and, importantly, the instant facts are distinguishable from Great-West Life’s facts in the very ways that the Supreme Court found to be disрositive there.
1. The Great-West Life Opinion
In Great-West Life, the Court determined that given the posture of that case, restitution, specific performance, and constructive trust were not equitable remedies that permitted federal jurisdiction of a fiduciary’s suit seeking to enforce an ERISA plan’s reimbursement provision.20 Great-West, the ERISA fiduciary that had funded medical care, sued for declaratory and injunctive relief, but Justice Scalia—as we should do here—looked beyond the labels of the requested remedies to their essentials, and held that Great-West actually sought “to impose personal liability on respondents for a contractual obligation to pay money—relief that was not typically available in equity.”21 Creative lawyering can couch this relief as injunctive to prevent violation of a plan, but that does not
I part company with the panel majority in my understanding of the Great-West Life Court’s basis for these distinctions between legal and equitable remedies. The majority seizes on the phrase “in the defendant’s possession” as a pronouncement that if the disputed funds are not in the defendant’s possession, the remedy sought must be legal, not equitable. This seriously misreads Great-West Life.
The Court’s analysis did indeed turn on the fact that the personal-injury proceeds had already been paid out: some to a special needs trust for Knudson, the tort victim, under a provision of California’s probate code; some to Knudson’s attorney; some to California Medicaid; and only $14,000 to the ERISA plan that had spent over $410,000 on the victim’s care.24 But the significance of this fact was not simply that the funds were not in the beneficiary’s possession; and, conversely, to read the Court’s opinion as requiring that the disputed funds be in the defendant’s possession is to mistake the relevant analysis.
A closer examination reveals the Court’s doctrinal point: After the distribution of the funds, the tort victim herself was left without specific, identifiable funds to which the ERISA plan could assert title.25 This fact made the remedy that Great-West sought to impose essentially personal and general contractual damages—classically, a legal remedy, which the statute does not permit.26 In othеr words, the Court’s test was not whether the money was in the defendant’s possession vel non, but whether the remedy that the plan sought to impose was legal or equitable; and this distinction turned on where the money to pay the judgment would come from: if from the defendant’s personal, fungible, and untraceable resources, the remedy sought was legal and proscribed. That was the case in Great-West Life; that is not the case with Bauhaus.
2. Disputed Funds Are in State Court Registry
In deciding today’s case, the majority glides past the most salient factual distinction between this case and Great-West Life for purposes of the analysis that the Court performed in that case. There was no parallel guardianship proceeding and thus no money in a state-court registry, as there are here. The posture of the instant case thus differs markedly from the posture that ultimately determined the outcome in Great-West Life.
This proposition—that the location of the instant funds in the Chancery Court’s possession, and not in the defendant’s possession, should actually defeat a rote application of Great-West Life—is borne out by this case’s resemblance to situations that Justice Scalia specifically and explicitly said Great-West Life did not reach. He cautioned that the Court did not “decide whether petitioners could have obtained equitable relief against respondents’ attorney and the trustee of the Special Needs Trust.”27 Leaving these questions undecided necessarily meant that the Court’s test hinged not on who possessed the disputed funds, but rather on what kind of remedy would enable the plaintiff to recover those funds. The attorney and the trustee, both technically third parties in Great-West Life, are closely analogous to the Chancery Court here; and that state court is far more neutral among and attenuated from the several claimants here than were the attorney and the trustee in Great-West Life, who were closely aligned with the defendant. It follows obviously and indisputably that by seeking funds held in the registry of a court—particularly a state court of equity28—Bauhaus does not seek to impose (1) a legal remedy (2) of general liability on Copeland or Holmes. That was the Court’s basic concern in Great-West Life, and we could have easily allayed it here.
3. Subrogation, Not Reimbursement
Another important distinction between Great-West Life and the instant case is the nature of the obligation that Bauhaus here seeks to enforce. The right that Bauhaus asserts is to subrogation, not reimbursement or restitution.
The plan provision at issue is less than pellucid, but when read fairly it requires that the Plan recover funds before the beneficiary does. The Plan may elect to pay the expenses of a beneficiary injured by a third party if the beneficiary (or “Covered Person”) agrees that
The Covered Person will reimburse the Plan out of the Covered Person’s recovery for all benefits paid by the
Plan. The Plan will be reimbursed prior to the Covered Person receiving any monies recovered from a Third Party or their [sic] insurer as a result of judgment, settlement, or otherwise....
....
The Covered Person further agrees that he will not release any third party or their insured without prior written approval from the Plan, and will take no action which [sic] prejudices the Plan’s subrogation right [emphasis added].
Needless to say, Copeland and Holmes have violated every clause of these paragraphs: They have failed to turn over funds to Bauhaus; they have themselves recovered before turning over anything; they have released the tortfeasors; and they have taken other actions to the prejudice of Bauhaus’s subrogation right. But the prohibitions on release and prejudicial action, and the requirement that Bauhaus recover its advances before the Covered Person is paid, remove any doubt that this provision is a subrogation provision, not a reimbursement provision, regardless of any loose or contradictory language in the document. The duty that this provision imposes on Copeland and Holmes becomes even clearer on close inspection of the form that Copeland signed after the accident so that Holmes might receive medical treatment. In signing that form, Copeland promised, on Holmes’s behalf,29 that:
I hereby agree that such plan is subrogated and succeeds to the right, which right is hereby assigned to such plan, of such covered individual to recover therefore [sic] against any person who ... is liable.... I further agree to take all such further action and to execute and deliver ... such further instruments as may be required to secure the foregoing rights for the plan.
This is in obvious contrast to the contractual provision implicated in Great-West Life. To quote the Court’s description of that provision:
The Plan includes a reimbursement provision that is the basis for the present lawsuit. This provides that the Plan shall have “the right to rеcover from the [beneficiary] any payment for benefits” paid by the Plan that the beneficiary is entitled to recover from a third party. Specifically, the Plan has “a first lien upon any recovery ...” that the beneficiary receives from the third party.... If the beneficiary recovers from a third party and fails to reimburse the Plan, “then he will be personally liable to [the Plan] ... up to the amount of the first lien.”30
This passage explains the Court’s reluctance to enforce the Great-West plan provision, which itself provided for personal liability of the beneficiary; Bauhaus’s does not. And, again, Great-West Life involved a reimbursement provision, not a subrogation provision.
The subrogation remedy contained in the instant provisions is doctrinally distinguishable from the varieties of restitution discussed in Great-West Life. Subrogation stands on its own as a typically equitable remedy.31 Unlike garden-variety restitu-
4. Other Equitable Remedies
The term “subrogation” does not occur anywhere in the majority opinion in Great-West Life, which discusses the remedies that the parties in that case contested: injunction, restitution, and common-law trust remedies.32 The panel majority may therefore be holding that subrogation is per se not an equitable remedy under the statute. To whatever extent the majority views Great-West Life as describing the only remedies available under
The Supreme Court’s discussion of trust remedies is particularly illuminating on this point. The Court noted that if a trustee advances funds to a trust beneficiary, that beneficiary’s interest in the trust may be subject to a charge for repayment of the money lent; but the Court distinguished the situation under scrutiny in Great-West Life by noting that “[t]hese setoff remedies do not give the trustee a separate equitable cause of action for payment from other moneys.”34 In contrast, the funds in the Chancery Court truly are analogous to the corpus of a trust,35 so Bauhaus has—or should have—a setoff remedy in federal court.36 Those funds
5. No Remedy in State Court
The fourth and final distinction between today’s case and Great-West Life is that here it is uncontroverted that Bauhaus lacks an adequate remedy in state court. This difference, while perhaps insufficient on its own to justify viewing the relief Bauhaus seeks as equitable, certainly adds strong support to that conclusion.
In Great-West Life, the justices raised this issue in debating what the Court’s holding would mean for cases in which a state-law action is preempted by ERISA. The majority stated that its opinion did not resolve the question:
We note ... that there may have been other means for petitioners to obtain the essentially legal relief that they seek.... We express no opinion as to whether petitioners could have intervened in the state-court tort action brought by respondents or whether a direct action by petitioners against respondents asserting state-law claims such as breach of contract would have been pre-empted by ERISA.37
This passage reflects the Great-West Life Court’s determination that the ERISA plan in that case may have had other remedies available to it. At the very least, the justices did not view that possibility as foreclosed.
In today’s case, though, that possibility is foreclosed. Bauhaus has no adequate legal remedy in either federal or state court. In federal court, by ERISA’s express terms, legal remedies are totally unavailable. In state court, Bauhaus is already party to the action in Chancery Court; but that action obviously will avail it naught, because, as I describe below, Mississippi’s anti-assignment rule holds sway there. This very problem was foreseen by Justice Ginsburg, dissenting in Great-West Life:
After today, ERISA plans and fiduciaries unable to fit their suits within the confines the Court’s opinion constructs are barred from a federal forum; they may seek enforcement of reimbursement provisions like the one here at issue only in state court. Many such suits may be precluded by antisubrogation laws, others may be preempted by ERISA itself, and those that survive may produce diverse and potentially contradictory interpretations of the disputed plan terms.38
The panel majority’s result will henceforth require insurers that advance funds to pay for medical treatment of minor or incompetent Mississippi tort victims to seek recovery of those funds in state court, where the insurers are now fated to fall victim to the state rule. What plan administrator would risk fiduciary liability by advancing funds of a plan under these conditions? None. And who will be the victims of this result? Plan beneficiaries injured by third parties.
The total absence of legal remedies in today’s case is important because such absence was key to the distinction between equity and law. Although Justice Scalia stated for the majority in Great-West Life
Because the Great-West Life Court expressed “no opinion” on questions central to this aspect of the distinction between law and equity, that case simply cannot be read to control the jurisdictional outcome in today’s case as mechanically as the panel majority would suggest. I am satisfied that we have the customary latitude here to apply the doctrine of adequacy of legal remedies as requiring resort to an equitable remedy and thus as supporting federal jurisdiction. I am even more satisfied that we have erred by failing to do so.
Federal courts are certainly courts of limited jurisdiction, but when that jurisdiction is mapped out by a statute like ERISA which textually incorporates equity’s long traditions of fairness and flexibility, those traditions must be imported into the jurisdictional cartographic exercise. That this importation might make the exercise less than crisp does not mean that the exercise is illegitimate; on the contrary, it implements Congress’s command and therefore is our assigned task. I would hold the remedy Bauhaus seeks in federal court to be equitable under the Mertens test. Indeed, equity arose for the very purpose of correcting such anomalies in a coordinate court system аs the one we should correct today.
6. Summary
In sum, I would heed the warning of the dissenters in Great-West Life that if the district courts are held to lack jurisdiction of cases such as this, ERISA plaintiffs like Bauhaus would have to sue in state court, overcome ERISA preemption, and then contend with a welter of disparate state laws—such as Mississippi’s anti-reimbursement doctrine at issue here—that could and likely would defeat the congressional purpose of achieving a nationally uniform set of rules to govern ERISA plans.41 This case presents a stereotypical example of what the Great-West Life dissenters feared; more importantly, its pos-
Copeland nevertheless advances three defenses to Bauhaus’s suit that she describes as jurisdictional: lack of a federal question, lack of federal jurisdiction over the “interpled” funds, and consent to state jurisdiction. To whatever extent my discussion of remedies has not already shown how these three jurisdictional issues should be resolved, they collapse into the preemption question: If ERISA preempts, there is a federal question; federal jurisdiction is exclusive42; the Chancery Court lacks jurisdiction to decide this case; and Bauhaus’s consent to remand to that court cannot have conferred jurisdiction on it. To preemption, therefore, I now turn—both to round out the jurisdictional argument and to demonstrate what is really at stake in this case.
II. PREEMPTION
The district court granted the motions to dismiss solely on preemption grounds. The court tersely stated that it
could engage in a lengthy analysis on the preemption question presented here, but, after careful consideration, the court finds that Clardy v. ATS, Inc. Employee Welfare Benefit Plan, 921 F.Supp. 394 (N.D.Miss.1996) (Davidson, J.), ably resolves this matter....
... This court is in accord with Judge Davidson’s conclusion that
the state law under consideration ... does not prevent subrogation of claims, nor does it even directly address the matter of subrogation. The administration of a minor’s estate is entirely a matter of state law, and is law of general application which affects a broad range of matters entirely unrelated to ERISA plans.... The [plan] in this case would have this court preempt not a state law which impinges upon contractual subrogation rights under ERISA, but a state law of general application which has only an incidental effect upon an ERISA plan. The state law in question ... relates to ERISA in “too tenuous, remote, or peripheral a manner” to be preempted in this case.43
Clardy, on which the district court relied entirely, is but one of several cases in which statе and federal courts in Mississippi have held that ERISA does not preempt the state’s jurisprudential rule requiring Chancery-Court approval of any assignment of a minor’s interest in insurance proceeds.
1. Mississippi’s Anti-Assignment Rule
Mississippi’s anti-assignment rule was announced in McCoy v. Preferred Risk Ins. Co.,44 in which the Mississippi Supreme Court derived, from that state’s uninsured-motorists law, the principle that
From the purely common-law rule of McCoy, state and federal courts in Mississippi have taken the giant step needed to reach the view that this rule somehow withstands ERISA preemption, oblivious to the universal recognition that ERISA’s is one of the most pervasive of all federal preemptions. In Cooper Tire & Rubber Co. v. Striplin,47 the Mississippi Supreme Court dismissed as “without merit” an employer’s argument that ERISA permitted the employer to enforce a subrogation agreement and recover the medical expenses of a covered minor to whom an insurer had paid benefits.48 The court proceeded from the premise that “Congress did not pre-empt areas traditionally regulated by the states”—areas such as domestic rеlations and minors’ business.49 This rallying cry has met with great favor in the Northern District of Mississippi: The instant case is at least the third in which that court has held that ERISA does not preempt the Mississippi anti-assignment rule.50 The district court certainly abided by its own jurisprudence, if nothing more precedential, in finding no preemption here. But that jurisprudence, examined in the light of Supreme Court precedent, is simply incorrect; for the Mississippi Supreme Court’s premise that ERISA does not preempt areas traditionally regulated by the states simply does not hold water.
2. Preemption under ERISA
ERISA states that “the provisions of this subchapter ... shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.”51 ERISA’s provisions preempt state jurisprudential rules as well as state statutes.52 It matters not that an ERISA savings clause states that “nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance”53: ERISA’s “deemer clause” declares that an
The Supreme Court has clarified that the “relate[s] to” standard shows that Congress intended ERISA “to establish pension plan regulation as exclusively a federal concern.”57 For example, in FMC Corp. v. Holliday,58 the Court held that ERISA preempted a Pennsylvania statute that forbade reimbursement or subrogation from a claimant’s tort recovery in a motor-vehicle action.59 There, the state law “relate[d] to” an ERISA plan because it “risk[ed] subjecting plan administrators to conflicting state regulations.”60 The Court stated that its construction of ERISA was “respectful of the presumption that Congress does not intend to preempt areas of traditional state regulation” because that construction distinguished between plans—like the one now before us—that are self-funded and those that are insured, permitting the states to regulate the latter more closely, in accordance with the states’ longstanding role in regulating the insurance industry.61
Despite its abstract concern for areas of traditional state regulation, however, when push has come to shove, the Supreme Court has held that ERISA preempts any number of such areas. For example, the Court held that ERISA trumps the effect of Louisiana’s community property system and succession laws, prototypical areas of traditional state regulation. In Boggs v. Boggs,62 the sons of a decedent’s first wife (herself also deceased) contended that her assignment to them of her interests in the decedent’s annuity was valid under Louisiana law; the second spouse claimed that the annuity was all hers under ERISA.63 After we, acting as a sharply divided en banc court, held for the sons,64 the Supreme Court reversed. Despite the fact that community property laws “implement policies and values lying within the traditional domain of the States,”65 the Court held that ERISA’s survivor annuity provisions preempted and controlled.66
Just last year, and more directly relevant to this appeal, the Supreme Court, in Egelhoff v. Egelhoff,67 confirmed that
If they instead decide to await the results of litigation before paying benefits, they will simply transfer to the beneficiaries the costs of delay and uncertainty. Requiring ERISA administrators to master the relevant laws of 50 States and to contend with litigation would undermine the congressional goal of minimizing the administrative and financial burdens on plan administrators—burdens ultimately borne by the beneficiaries.71
The Court acknowledged that family law is an area of traditional state regulation, but concluded that the presumption against preemption in such an area “can be overcome where, as here, Congress has made clear its desire for preemption. Accordingly, we have not hesitated to find state family law pre-empted when it conflicts with ERISA or relates to ERISA plans.”72
Egelhoff is not meaningfully distinguishable from this case. Each dispute involves payment of benefits under the plan; each state’s law would prevent the plan administrator from relying on the plan’s documents alone; and each state’s law implicates a traditional area of state regulation. Albeit prior to Great-West Life, district courts in several circuits have squarely held that, to the extent there is any conflict, ERISA preempts state statutes that protect minors against parental assignment of their insurance proceeds or other parental contracts on their behalf.73
Copeland does not address these precedents, virtually ignores Boggs and Egelhoff, and in attempting to distinguish FMC, mischaracterizes what the district
To summarize, the Supreme Court has made abundantly clear that by enacting ERISA, Congress spoke loudly and lucidly enough to preempt both Louisiana’s marital-property system and Washington’s family and probate law. Given these precedents, Mississippi’s anti-assignment rule cannot withstand preemption. A minor’s financial business is traditionally an area of state regulation, but no more so than family-property, inheritance, or probate law.
III. CONCLUSION
I regret that my colleagues’s parsimoniousness with federal jurisdiction pretermits our addressing this issue and reaching this indubitable result. Plaintiffs who put forward claims that are completely controlled, and indeed vindicated, by the most panoramic and potent federal statutory preemption presently on the books should have their days in federal court.
For the foregoing reasons, I view the district court’s dismissal for either lack of jurisdiction or failure to state a claim as reversible error. Despite the majority’s reliance on Great-West Life to affirm the district court, I am convinced that the district court did have jurisdiction of this case.
I respectfully dissent.
UNITED STATES of America, Plaintiff-Appellee, v. Matthew L. MORGAN, Defendant-Appellant.
No. 01-20500.
United States Court of Appeals, Fifth Circuit.
May 23, 2002.
Notes
20. Plaintiff demands that this Court enter declaratory judgment in favor of Plaintiff determining and declaring that Bauaus [sic] is entitled to and shall receive full reimbursement of $46,229.45 from the proceeds of the settlement....
Wherefore, premises considered, Plaintiff prays that this Court declare that Bauhaus USA, Inc. is entitled to $46,229.45 from the aforementioned settlement proceeds and that this Court will advance this matter on its docket, order a speedy hearing as provided in Rule 57 of the Federal Rules of Civil Procedure and for [sic] other general relief to which Plaintiff may be entitled [emphasis added].
The operation of the Declaratory Judgment Act is procedural only. By passage of the Act, Congress enlarged the range of remedies available in the federal courts but it did not extend their subject-matter jurisdiction. Thus, prior to deciding whether to exercise its discretion and allow a declaratory-judgment action to be brought, the court must determine if jurisdiction and venue are proper. There must be an independent basis of jurisdiction, under statutes equally applicable to actions for coercive relief, before a federal court may entertain a declaratory-judgment action.
The chancery court shall have full jurisdiction in the following matters and cases, viz.:
(a) All matters in equity;
(b) Divorce and alimony;
(c) Matters testamentary and of administration; [and]
(d) Minor’s business[.]
Except for actions [by participants or beneficiaries] under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, [or] fiduciary.